Bank’s major approach in her internal rating system is credit scoring valuation which focused on corporates’ idiosyncratic risks and based on their financial indexes. Hence, an influence on corporates’ credit risks by business variation is not considered in her system. We model the effect on corporates’ credits by macroeconomic variables and analyze it. Firstly we model a corporate’s credit variable by the credit cycle index and her idiosyncratic risk factor, and consider the correlation between the business and credit cycles. | Default forecasting considering correlation between business and credit cycles
